Negotiation’s Numbers

February 9, 2014

in Leadership, Negotiation

In negotiations, there is typically a back-and-forth process to discover if there is an agreeable number which works for both parties. If the initial offers from each side are non-overlapping, there is often a ratcheting on each side to try to come closer together.

The numbers themselves, including how they are played, matter a lot. For instance, imagine a scenario where A and B are negotiating. These two scenarios result in different outcomes:

  • A starts at $100; B counters with $20; A $80; B $40; A $60; B $50; A $55; agreement
  • B starts at $20; A counters with $100; B $40; A $80; B $60; A $70; B $65; agreement

That’s over 18% different just due to the ways in which the numbers were played. Numbers and how they are played matter. It is important to think through the end game throughout the entire negotiation process.

Derek Sivers has a must read post on this concept. He shares how he can auction off a $100 bill for more than $100.

Here are things to think about:

  • The initial anchor number is very important and often sets the tone for the entire negotiation; setting the anchor number is more often the enviable position.
  • Look for ways to get the other side to make consecutive movements in their number so that you can skip a step of movement.
  • Try to move in smaller increments than the other side.
  • Be prepared to walk away from the table.

What are your thoughts on the numbers in a negotiation?

 

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  • Ty

    Negotiations are a great topic. One addition – while anchoring has a very real affect, you can often anchor without necessarily going first. I’ve seen it recommended to never be the first to throw out a figure if you can help it. There are various reasons, the largest being that the other side may completely undervalue their position and that can become evident before you even have to show your hand. If they overvalue, well, you can just anchor on the other side. Another good bit of advice I’ve received: Your first offer should always be low, but not so low you offend. The book “Negotiating Rationally” by Bazerman and Neale is a quick read with good insights.

    • melonakos

      Great advice! Liked the bit about anchoring too.

      I own that book but haven’t cracked it yet. You’ve given me the motivation to do so!

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